A Machine with a 10-Year Useful Life Is Being Depreciated

question 28

Multiple Choice

A machine with a 10-year useful life is being depreciated on a straight-line basis for financial statement purposes, and over 5 years for income tax purposes under the accelerated recovery cost system. Assuming that the company is profitable and that there are and have been no other timing differences, the related deferred income taxes would be reported in the balance sheet at the end of the first year of the estimated useful life as a

• A) Current liability
• B) Current asset
• C) Noncurrent liability
• D) Noncurrent asset

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Definitions:

Simple Interest

Interest calculated only on the principal amount, or on that part of the principal amount which remains unpaid.

Principal

The principal refers to the initial amount of money lent or invested, excluding any interest or growth.

Annual Rate

The interest rate for a period of one year, often used as a benchmark for savings or loan interest calculations.

Investment

The process of distributing funds or other resources with the goal of earning returns or profits.